I am often asked by small business owners about which travel expenses can be deducted for business. Typically, the question goes something like this:
“I went to California with my family, but while I was there I attended a couple classes and handed out my business card to people everywhere we went. Can I write off my trip?”
I hate to be the bearer of bad news, but I’m just going to say it….NO! Honestly, does that sound like something the IRS would let you write off? I mean, let’s just be straight here. Do you really think taking your kids to Disneyland is a tax deduction for entertainment? Don’t get me wrong, I’d love to write off my vacations too! In fact, my husband always wants me to save receipts from when we visit my parents out of state. They work for me part of the year and he thinks if we go visit them, it’s a business trip. Wrong hubby! (Shaking my head.)
There are guidelines for deducting travel expenses. Depending on the purpose of the trip and what you do while you are out of town, you MAY be able to write off some of your costs. Let’s break it down -
Be honest with yourself. What is the primary purpose of the trip? Is it to meet with a new supplier? To meet with realtors and scout locations for a second office? To attend a national conference in your industry? To visit Mom and Dad? To go to an amusement park? To have a romantic weekend? A good rule of thumb is to take into consideration that if the trip is primarily for business, you will be able to document that purpose. Examples: 1. Meeting with a new supplier – you might take pictures of products, pick up catalogs, get estimates, etc. 2. Scouting locations for a second office – you will have paperwork on the different locations you looked at, maps of the area, estimates on cost, and most likely a packet of paperwork from the realtor 3. Attending a national industry conference – You will have a name badge, a receipt for the cost of the conference, brochures and information from speakers and vendors at the conference, etc.
If the primary purpose of the trip is for business and that is what you spend the majority of your time doing, then you will be able to write off your transportation, lodging, meals, etc. You CANNOT write off any of the costs for your family to travel with you. You also cannot deduct the cost of lodging for any days that you remain on vacation after the primary business purpose has been served.
What if the primary purpose is recreation, but you happen to do some business while traveling? You might still have some deductions, but they will not include airfare or lodging. If you attend classes, you can deduct the fees of those. If you hand out business cards, samples, or gifts to drum up business, you could write off those. If you meet with potential clients, vendors, networking peers, etc. for a meal to discuss business, you could write off the meal.
So in the future, when determining if you can write off your vacation, ask yourself what the primary purpose of the trip was and what kind of documentation do you have to back it up.